Note 10 - BioLargo Engineering, Science and Technologies, LLC	12 Months Ended
Dec. 31, 2019
Notes to Financial Statements
Wholly-Owned Subsidiary [Text Block]	Note 10. Biolargo Engineering, Science and Technologies, LLC In September 2017, we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary, we entered into a three -year office lease in the Knoxville, Tennessee area, and entered into employment agreements with six scientists and engineers. (See Note 12 “Business Segment Information”.) The company was capitalized with two classes of membership units: Class A, 100% owned by Biolargo, and Class B, held by management of BLEST, and which initially have no “profit interest,” as that term is defined in Tennessee law. However, over the succeeding five years, the Class B members can earn up to a 30% profit interest. They also have been granted options to purchase up to an aggregate 1,750,000 shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a five year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by March 31, 2018 ( which was not met), collecting 90% of its account receivables, obtaining a profit of 10% in its first year (and increasing in subsequent years), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST’s compensation committee (which includes BioLargo’s president, CFO, and BLEST’s president), beginning September 2018. Given the significant performance criteria, the Class B units and the stock options will only be recognized in compensation expense if or when the criteria are satisfied. Since the commencement of operations, the Compensation Committee has met twice, once in September 2018, and once in November 2019. In 2018, it reviewed the operating performance and determined that the performance metrics were not met and as a result, did not award any Class B units or stock options. The Committee decided to roll forward one additional year to the time allowed for the performance metrics to be met and for the Class B units and stock options to be awarded. In November 2019, the Compensation Committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that one -half of the eligible profits interests would be vested ( 2.5% in the aggregate), and therefore one -half of the option interests ( 10% ) would be vested ( 175,000 options shares in the aggregate). The vesting of option shares resulted in a fair value totaling $44,000, recorded on our consolidated statement of operations as selling, general and administrative expense. The fair value of the profit interest was nominal and not booked.

Note

10.

Biolargo Engineering, Science and Technologies, LLC

September 2017,

we commenced a full-service environmental engineering firm and formed a Tennessee entity named BioLargo Engineering, Science & Technologies, LLC (“BLEST”). In conjunction with the start of this subsidiary, we entered into a

three

-year office lease in the Knoxville, Tennessee area, and entered into employment agreements with

six

scientists and engineers. (See Note

“Business Segment Information”.) The company was capitalized with

two

classes of membership units: Class A,

100%

owned by Biolargo, and Class B, held by management of BLEST, and which initially have

“profit interest,” as that term is defined in Tennessee law. However, over the succeeding

five

years, the Class B members can earn up to a

30%

profit interest. They also have been granted options to purchase up to an aggregate

1,750,000

shares of BioLargo, Inc. common stock. The profit interest and option shares are subject to a

five

year vesting schedule tied to the performance of the subsidiary, including gross revenue targets that increase over time, obtaining positive cash flow by

March 31, 2018 (

which was

not

met), collecting

90%

of its account receivables, obtaining a profit of

10%

in its

first

year (and increasing in subsequent years), making progress in the scale-up and commercialization of our AOS system, and using BioLargo research scientists (such as our Canadian team) for billable work on client projects. These criteria are to be evaluated annually by BLEST’s compensation committee (which includes BioLargo’s president, CFO, and BLEST’s president), beginning

September 2018.

Given the significant performance criteria, the Class B units and the stock options will only be recognized in compensation expense if or when the criteria are satisfied.

Since the commencement of operations, the Compensation Committee has met twice, once in

September 2018,

and once in

November 2019.

2018,

it reviewed the operating performance and determined that the performance metrics were

not

met and as a result, did

not

award any Class B units or stock options. The Committee decided to roll forward

one

additional year to the time allowed for the performance metrics to be met and for the Class B units and stock options to be awarded.

November 2019,

the Compensation Committee again reviewed the operating performance and determined that a portion of the performance metrics were met. It was agreed that

one

-half of the eligible profits interests would be vested (

2.5%

in the aggregate), and therefore

one

-half of the option interests (

10%

) would be vested (

175,000

options shares in the aggregate). The vesting of option shares resulted in a fair value totaling

$44,000,

recorded on our consolidated statement of operations as selling, general and administrative expense. The fair value of the profit interest was nominal and

not

booked.